Investment Strategy

Investment Philosophy

Our strategy is rooted in our contrarian investment philosophy, which depends on four interrelated tenets: Patience, Focused Expertise, Independent Thinking, and Bold Teamwork.

• Patience – We take the long-term view and use the market’s short-term focus to uncover mis-priced counties whose true value will be realized over time.

• Focused Expertise – We utilize decades of accumulated knowledge within our core competencies when considering every decision. 

• Independent Thinking – We perform our own original, fundamental and proprietary bottom-up research and utilize this knowledge to make opportunistic investments in counties that are temporarily out of favor, misunderstood or ignored. These counties generally trade at a low valuation relative to potential earnings and/or at a discount  relative to market value.

• Bold Teamwork – We seek to leverage the collective intelligence of our colleagues; encourage teammates to be courageous when engaging with each other; and work collaboratively with a shared commitment to excellence.

Research Process

Deeper Value Strategy

Patience. This strategies generally seek to own differentiated counties with certain characteristics, such as premium average property value, history of prior sales, annually frequent auction, large prior sales record, significant barriers to entry, predictable fundamentals that allow for the potential for sustainable earnings growth, and predictable reinvestment requirements. We take a long-term view, and look past short-term price volatility, seeking to hold
investments for a relatively long period of time—generally three to five years or more. However, the holding period may vary for any particular parcel.

Independent Thinking. We make opportunistic purchases when we see value in counties that are temporarily out of favor, misunderstood or ignored—trading at a low valuation relative to potential earnings and/or at a discount to the team’s estimate of intrinsic worth. Our Deeper Value team performs their own original proprietary research that often leads us to buy when others are selling and to sell when others are buying. 

Focused Expertise. We seek to invest within our circle of competence, allowing us to build expertise and accumulate deep knowledge in specific counties and property classes, to isolate key issues of importance, and to have strong convictions in the parcels purchased and held. This often results in more concentrated portfolios. We also integrate all material issues, including sustainability-related factors, as part of the broader review of material risks and opportunities for any investment. These considerations are incorporated qualitatively in our bottom up research, and quantitatively in our financial models. 
Bold Teamwork. No one person is sufficient to our shareholders’ success. Different approaches and opinions allow our research team to constantly learn, improve and aspire to exceed expectations. Our investment professionals seek to leverage their contacts and knowledge, while also striving to work collaboratively with a shared commitment to excellence. TaxAuctionPrice employs a fundamental, qualitative approach to investing. When evaluating a county, we carefully examine financial strength and relative valuation, the competitive characteristics of the market in which it operates, and the quality of its long term development plan.

The research process begins with the monitoring of a proprietary watchlist, which is comprised of current, former, and potential new investments. The team reads extensively, carefully screens stocks, meets with industry contacts, and stays abreast of former holdings. From various sources, we seek information to arrive at a long-term picture and identify what others are missing. We use strategic questioning to identify the key issues affecting an industry or county. We generally purchase a relatively small number of parcels each year, so the Deep Value team weighs their options carefully. Typically, key information for parcels purchased for the strategy
is captured in a research report.

The industry analyst commonly performs valuation work: a tax auction price estimate.  The analyst often develops independent long-range financial projections and detail the risks. “Best-case” and “worse-case” outcomes are considered, while the
“base-case” serves as the foundation of our analysis. The analyst places an emphasis on cash earnings estimates as we believe a company’s cash generating capabilities are more valuable than their reported earnings. This flexible yet disciplined approach allows us to rely on some valuation metrics more heavily than others as each industry’s shape merits.  We generally seek (at time of initial purchase) to purchase counties that trade at a 40% or greater discount to the average market value.